CALGARY, NOV 15 Dow Jones Commodities News Select via Comtex -By Norval Scott, Dow Jones Newswires
First Calgary Petroleum (FCP.T) may turn its back on an Algerian oil block with estimated reserves of 100 million barrels of crude if it's not given more time to appraise it, the company has said.
In addition, although the company has enough working capital to fund its planned 2006 capital program, it will need 'significant' external funding to bring its oil and gas reserves in Algeria through to commercial production, it said in a press release last week.
First Calgary's exploration contract in Algeria's Yacoub Block 406a, which the company said earlier this year could contain 100 million barrels of crude, ended on Nov. 10, but it's been granted a three-month extension to complete the appraisal of the results of its ZCH-2 well there.
However, that extension may not give the company enough time to complete its plans, and it may have to cease operations if another extension isn't granted, First Calgary said in a press release.
"The three-month extension may not allow sufficient time to fully appraise the discovery and assess its commercial viability," it said.
"(First Calgary) will request additional time to complete the ZCH assessment. In the event additional time is not granted, the company may decide to cease further activity on the ZCH discovery," it said.
The block was expected to provide approximately 10% of the company's estimated future net revenue, the company added. Earlier this year, First Calgary President and CEO Richard Anderson said that the block had estimated reserves of approximately 100 million barrels, and outlined a US$300-500 million, 18-24 month plan to bring the crude onstream.
First Calgary spokesman James Henderson told Dow Jones Newswires that the company had applied for a new extension for Block 406a, and denied suggestions that the company was walking away from the block.
"They haven't given up on it," he said.
Aside from the Yacoub crude, First Calgary is now looking to bring its gas reserves from Ledjmet Block 405b onstream, with first production targeted for 2008. The development of the block's total reserves could cost US$2 billion, the company said.
Earlier this year, CEO Anderson said that gas from Ledjmet would be brought onstream in tranches, with production initially at 350 million cubic geet per day, rising to 1.2-1.3 MMcfd.
First Calgary will need to attract additional funding to fulfil these ambitions. Although it can meet its 2006 obligations, "the company will require additional capital to fund future operations and capital spending," it said.
"In addition, the development of the company's reserves through to commercial production will require significant funding," it added. Spokesman Henderson said that that funding would likely come through attracting project finance.
It's been a torrid year for First Calgary, which attempted, and failed, to secure a strategic partner or buyer earlier in 2005, as interested suitors balked at the company's asking price. The company's share price on the Toronto Stock Exchange has fallen 75% from its February peak of $24.90 a share, to $6.00 a share today.
The company's now not publicly looking for a bidder and has said it's looking to develop its Algerian assets on a stand-alone basis. Spokesman Henderson wouldn't comment on whether the company would accept a takeover offer if one was made today.
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